Chinese inflation slows at quickest pace in more than a year

Chinese inflation has risen at its slowest pace in more than a year, giving
the government leeway to further ease credit restrictions to encourage
economic growth.

During the whole of 2011, inflation stood at 5.4pc, well above the government's target of 4pc and higher than the 2010 rate of 3.3pcPhoto: EPA

By Telegraph staff and agencies

6:15AM GMT 12 Jan 2012

The country's consumer price index rose 4.1pc year-on-year in December, the National Bureau of Statistics said, compared with 4.2pc in November.

During the whole of 2011, inflation stood at 5.4pc, well above the government's target of 4pc and higher than the 2010 rate of 3.3pc.

December's figure was the fifth straight month that China's inflation rate has slowed, since it peaked at a more than three-year high of 6.5pc in July, as measures introduced to curb surging consumer prices took effect.

Last month's 4.1pc was the lowest level since September 2010, when inflation rose 3.6pc, but slightly higher than the 4pc rise analysts had expected.

Food prices - a key driver of inflation - rose 9.1pc year-on-year in December, compared with 8.8pc in November, which analysts said was likely due to the unusually early Lunar New Year, which falls in January. Retail sales typically soar ahead of the week-long break.

Analysts said they expect Beijing to cut banks' reserve requirement ratio - effectively increasing the amount of money they can lend - in the coming months as the government shifts its focus to spurring economic growth amid turmoil in the West.

"In theory, this should open up some more space for monetary loosening to combat slowing growth and a tumbling property market," said Ren Xianfang and Alistair Thornton, analysts at IHS Global Insight.

Growth in the producer price index, which measures the cost of goods at the farm and factory gate, also slowed to 1.7pc in December from 2.7pc the previous month and 5pc in October.

The Shanghai Composite fell after the figures were released, dropping 7.07 points, or 0.31pc, to 2,268.98. It recovered to trade down 0.1pc at 6am GMT.

Data earlier this week showed China's exports rose 20.3pc in 2011, compared with an increase of 31.3pc in the previous year.